Overview
FAR 33.204 establishes the federal government’s policy to resolve contractual disputes through mutual agreement at the contracting officer level and encourages the proactive use of Alternative Dispute Resolution (ADR) to avoid formal claims and litigation.
Key Rules
- Prioritize Mutual Agreement: The primary objective is to resolve controversies through negotiation between the contractor and the contracting officer.
- Pre-Claim Resolution: Parties are expected to make "reasonable efforts" to settle issues before a formal claim is ever submitted.
- ADR Preference: Agencies are mandated to use ADR procedures to the "maximum extent practicable," provided the situation does not meet the exclusionary factors listed in 5 U.S.C. 572(b).
- Statutory Authority: Agencies have the authority to use ADR procedures independently of the Administrative Dispute Resolution Act (ADRA), though they may also choose to operate under ADRA requirements.
- Arbitration Exception: Unlike other ADR methods, arbitration must specifically follow the procedures and requirements conducted pursuant to the ADRA.
Practical Implications
- Contractors should engage in intensive informal negotiations and "arm’s length" discussions with the Contracting Officer early in a dispute to avoid the administrative burden of the Contract Disputes Act (CDA) process.
- Both parties should view ADR (such as mediation or neutral evaluation) as a standard tool for resolution rather than a last resort, potentially saving significant legal costs and time compared to Board of Contract Appeals or Court of Federal Claims litigation.